Have you noticed a gradual rise in your insurance premiums over the last few years? I certainly have – every time I go to compare car insurance prices I’ve noticed a steady rise in my premium, and the chances are you will have too.
There are plenty of reasons for this. Some of the more obvious ones include the costs of accidents involving uninsured drivers as well as the increase in ambulance-chasing law firms claiming huge payouts for ‘physical injuries’ that, a few years ago, most people would have shrugged off as a bit of a stiff neck.
There’s another cause of the hike in premiums and, unless you’ve been involved in an accident, you might not be aware of it. This is the growth of ‘credit hire’, which involves an ‘accident management’ company stepping in if you have a car crash. They will then offer you an equivalent hire car while they manage the repairs to your car, which sounds like a reasonable service to offer.
Beware though, because the hire credit agreement is between the accident management company and you personally, not your insurer. What you might not realise is that the rate being charged for the replacement car may be far in excess of what you would pay from a normal rental company, maybe as much as three times the going rate. This is how the accident management company makes its money, and of course it is in their interest to drag out the time it takes to repair your car and keep you in the hire car.
When you get your car back the accident management company will then charge the insurer of the at-fault driver for the hire of the replacement car. This is where the ‘credit’ in ‘credit hire’ comes in, because if the insurer thinks the charges are unreasonable and refuses to pay then you will be liable for the full rental cost, and that’s a bill that could easily run into the thousands of pounds.
Honest John, the motoring guru at the Daily Telegraph, has been warning about these companies for some time now. Last year he received a letter from a reader who was charged £31,700 for 77 days rental (£411 a day) of a replacement X5 while their own was being repaired. The cost of the repairs was £9,500 and the car was valued at just £20k, so when the claim went to the insurance company they saw the extortionate rental bill and refused payment.
In some cases where insurers have refused to pay, drivers have even been sued for the credit hire costs of a car provided to the other party involved in the crash.
Of course, if the insurer doesn’t question the costs then they will pay the inflated charges and you’ll be none the wiser. This in turn increases the total cost of your claim and eventually means that we all have to pay more to keep the insurer’s profit margins intact.
If you are approached by one of these accident management companies after a crash then you should read the small print in the contract very, very carefully. Check whether the car being offered is a ‘courtesy’ car or a ‘credit hire’ car, and make sure that it is equivalent to your car. No matter how tempting don’t accept a Porsche if your budget supermini gets smashed. Also, if your car is still driveable then the insurer will take a dim view of you taking on a hire car to cover the days or weeks until your car goes in for repair.
One final thing is that you should be absolutely sure that you weren’t at fault in the accident. If you are found to be partially at fault, or worse completely at fault, then you may find that rental bill appearing through your letterbox.
For more information look at Honest John’s guide for a full background on credit hire. There is also a list provided by the Association of British Insurers that details the maximum amount insurers should be expected to pay for the rental of an ‘equivalent’ car.